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Federation Business School BUACC3741: Auditing

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Question 1. (7 marks) The International Accounting Standards Board (IASB) recently issued Exposure Draft IFRS Practice Statement Application of Materiality to Financial Statements to provide guidance to assist management when applying the concept of materiality to general purpose financial statements. Information is material if omitting or misstating it could influence decisions that users make on the basis of financial information about a specific reporting entity. Guidance is proposed in the following three main areas: • Characteristics of materiality • How to apply the concept ...

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Question Preview:

Question 1. (7 marks) The International Accounting Standards Board (IASB) recently issued Exposure Draft IFRS Practice Statement Application of Materiality to Financial Statements to provide guidance to assist management when applying the concept of materiality to general purpose financial statements. Information is material if omitting or misstating it could influence decisions that users make on the basis of financial information about a specific reporting entity. Guidance is proposed in the following three main areas: • Characteristics of materiality • How to apply the concept of materiality when making decisions about presenting and disclosing information in the financial statements, and • How to assess whether omissions and misstatements of information are material to the financial statements. Explain and discuss Question 2. (7 marks) Two main issues for auditors going forward concern ‘Big Data’ and ‘End-to-End Software Integration’. Explain and discuss Question 3. (6 marks) From transformative technology to complex regulation to unprecedented geopolitical risk, an increasing tide of disruptive trends are demanding substantive change to the global role of audit committees. Explain the nature of disruption in this context

Sourced from KPMG Audit Trends 2016 https://assets.kpmg.com/content/dam/kpmg/pdf/2016/05/Audit-Trends-2016.pdf

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Characteristics of materiality

The materiality concept refers to the impact of materiality constraints in the financial statements. At the time of Audit planning process, the level of materiality is decided by the auditor taking into consideration the entire disclosure of financial information about the company. The decisions are based on judgement made by the auditor on nature, size, any misstatement or omissions that can influence the decisions of the user of financial information.

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